New York Public Library: Science, Industry and Business Library Preserve Family Assets & Age With Dignity: Long Term Care and Medicaid Planning

Disclaimer All information contained in these pages is for informational purposes only. It should not be considered legal advise. Please consult an attorney before taking any steps based on this information.

What Are We Talking About? Providing for personal care as we or our family members age Providing an opportunity to stay in our homes while receiving care Preserving family wealth Preparing for many years of care

Who Are the Central Players? Individual in Need Family Members (sometimes) Health Care Agent “Attorney in Fact” on Power of Attorney Financial Planner Estate / Elder Law Attorney Geriatric Care Manager / Social Worker

Congratulations! You have lived to a ripe age! You have had many experiences You may have substantial assets You may (or may not) have family

The Need: Activities of Daily Living ACTIVITIES OF DAILY LIVING (“ADLs”) Transferring (Ie. Walking) Bathing Dressing Eating Continence Toileting

LTC Insurance to the Rescue! Long Term Care Insurance = Private Pay Pays for Home Care: a certified caregiver comes to your home to assist you with your ADLs OR Pays for Nursing Home Care A need for more constant care Trained staff on-site (such as nurses)

LTC is NOT… Medicare Medicaid Health Insurance Disability Insurance Life Insurance

LTC: How the Benefit Works Example: $250 per day for 5 years $250 x 365 days x 5 years = $456,250 $456,250 is usually your guaranteed amount This is your “Insurance Pool” If you use it slower = lasts longer If you use it faster = lasts less time

Other Optional Aspects Cost of Living Adjustment $150 per day @ 2014 levels; increases 5% per year Life Insurance / LTC Hybrid Policies Home Care % lower than Institutional Care

Coverage Caveats Some policies pay less for home care than nursing home care Example: $250 per day for Nursing Home $125 Per day for Home Care

LTC: What Effects Premiums? Age Health Coverage Amount per day Amount of years Is Home Care % same as Nursing Home Coverage?

LTC Problems Very few lapsed policies! Lapsed policies were built into premium prices Insurance companies losing money!!! Insurance Company “Fixes” – for new AND existing policies: Premiums raised Coverage Terms decreased

MEDICAID A government program that pays for people needing help with ADLs Reminder: NOT Medicare MEDICARE: An “Entitlement Program” – you paid for it, you get it Pays for HEALTH care MEDICAID: A “Needs Based Program” “Means Tested” must meet asset & income limitation requirements

Types of Medicaid Community Care Institutional The type of Medicaid benefit you receive determines “look back” periods (I.e. the penalty for transferring assets) Community Care Personal care, physical therapy, home health care and home health aid services; clinical or out-patient basis; includes physicians, dentists, pharmaceutical, nursery Institutional Hospitals, medical facilities, nursing homes

Financial Eligibility Requirements for an Individual Eligibility is based on people who are “Medically Needy,” “Categorically Needy” and “Legal US Residents” Medicaid is “Means Tested,” meaning the recipient must have limited financial means ASSETS $14,550 in the recipient’s name EXCEPTIONS: “Burial Allowance” of $1,500 Life Insurance: $1,500 cash value Personal Property (unlimited) Your House (ONLY for Home & Community care) Supplemental Needs Trusts Medicaid Trusts Retirement Plans (IRAs) are exempted from assets if they are in “payout status” (Required Minimum Distributions or Separate and Equal Periodic Payments if recipient is under age 59 ½), in which case payments are included in Income MONTHLY INCOME HOME CARE: $809 per month Any excess income must go to the recipient’s “SPEND DOWN” INSTITUTIONAL (at a Nursing Home): ALL of the recipient’s monthly income in excess fo $50 must be paid to the NH to offset Medicaid payments

Transfer Penalties Home & Community Care Nursing Home Department of Social Services and Medicaid impose a “Lookback Period” for transferring assets outside of the proposed recipient’s name Home & Community Care 3 MONTH Lookback One Strategy: Transfer all financial assets (except $14,550) to a non-spouse, wait one month for bank statements to be updated, then apply for Home Care. DOWNSIDE: If the recipient needs Nursing Home care the 5 Year Lookback rule applies Nursing Home 5 Year Lookback Period, and the Homestead can be attached by Medicaid EXAMPLE: In January, 2010 Mary transfers her Coop and most of her assets to her son Joe (total of $280,000), and applies for Home Care. In March 2014 Mary goes to a Nursing Home. She failed to make the 5 year Lookback (4 years & 2 months). Nursing Home Care in Manhattan equals approximately $12,000 per month. $280,000 (amount gifted) = 23.3 MONTH $12,000 (monthly benefit) “Penalty Period” Medicaid will not pay Mary’s Nursing Home benefits for 23 months. ..and Joe is liable. Joe should have paid for Mary’s care for 10 more months to get through Mary’s Lookback Period.

Income Only Trusts (a “Medicaid Qualifying Trust”) These Trusts are used to distribute income or hold property (including a primary residence) in Trust to avoid Medicaid from attaching assets The Creator chooses the residuary beneficiaries The Creator can be the recipient, spouse, the recipient’s Power of Attorney or an Administrative body The Beneficiary and his/her spouse can ONLY receive income (NO principal) from the Trust The 5 Year Lookback DOES apply if the recipient needs nursing home care, so these may not be a good idea if Nursing Home care is imminent The Trust is Irrevocable / cannot be amended

What About the “Well” Spouse? The “Community Spouse” is entitled to some assets and income, but they are limited If spouse is in a Nursing Home: $2,931 of income per month $74,820 - $117,240 of resources If spouse has Home Care: Combined income of `$1,192 per month During the Medicaid Application process the well spouse may exercise a “Spousal Refusal” to avoid inclusion of his/her assets and income Medicaid may accept this, but will have a claim against the well spouse when he/she dies

LTC versus Medicaid LTC Medicaid Costs Insurance Premiums Legal Fees Quality Care Typically Quite Good Varies Asset Transfers No problem Heavily regulated Oversight Insurance Company Government (DSS)

LTC & Medicaid Strategy When the need for care arises and you have a LTC policy: Inform LTC agent / Financial Planner Hire a Social Worker & Attorney Get policy paying Transfer assets EXCEPT what is needed for 5 years; HOLD FUNDS IN RESERVE! Apply for Medicaid when policy coverage nears its end

See a lawyer who focuses on Elder Law

Thank You! Daniel Timins, Esq. dan@timinslaw.com 477 Madison Avenue, Suite 240 New York, NY 10022 (212) 683-3560